Texaco Tells of $4-Billion Deal for Canada Unit : Oil Giant’s Asset Sale May End With Purchase by Exxon-Controlled Firm

In a transaction worth up to $4.15 billion, the once-bankrupt oil giant Texaco on Friday neared the completion of the massive asset sale that grew out of its ill-fated courtroom battle with Pennzoil.

Texaco announced the sale of its 78% interest in Texaco Canada Inc. to Canada-based Imperial Oil Ltd., which is controlled by the world’s largest oil company, Exxon Corp. Texaco Canada had been on the market since August.

If completed as planned, the sale to the Exxon subsidiary would bring to about $6.8 billion the price fetched by a series of asset sales over the past eight months. The sales--the centerpiece of Texaco’s post-bankruptcy reorganization--were aimed at raising at least $5 billion.

Earlier, the company sold a large German subsidiary to a European firm for about $1.2 billion and a half-interest in three U.S. refineries to Saudi Arabia for $1.8 billion. Still to come is a previously announced special dividend to shareholders of some $1.7 billion.

Special Dividends

The oil company emerged from bankruptcy last April after agreeing to pay Pennzoil $3 billion as an out-of-court settlement in their long-running legal battle over Texaco’s tactics in its 1984 acquisition of Getty Oil Co.

Numerous oil companies had voiced interest in buying Texaco Canada. Exxon is believed to have edged out Australian financier Alan Bond. Other bidders included Husky Oil Co. and Royal Dutch Shell.

The deal calls for Imperial Oil--which is 70% owned by Exxon and is already Canada’s largest oil company--to buy Texaco’s controlling interest in Texaco Canada for $34.46 per share, or $3.24 billion in cash.

Imperial must then offer the same per-share price to the estimated 4,500 small shareholders who own the balance of Texaco Canada. That would bring Imperial’s outlay to about $4.15 billion.

In addition to the $3.24 billion that Texaco would realize from the sale of its shares, the New York-based company is to receive another $573 million in pending special shareholder dividends previously voted by Texaco Canada’s board.

Texaco Canada, that nation’s fourth-largest oil company, produces crude oil and natural gas. It also refines oil into gasoline and other products at plants in Nova Scotia and Ontario, and sells the products at about 1,800 service stations.

Texaco Canada reported income of $270 million on revenue of $2.27 billion in 1987.

Investors liked terms of the sale for Texaco, which received a better price than some analysts had expected. The company’s stock headed the most active list on the New York Stock Exchange and closed up 87.5 cents at $55.625, its highest price in at least a year. Exxon shares, also heavily traded, closed unchanged at $45.

Icahn Mum

“It looks like a fairly good deal for both parties,” said Charles Andrew, a senior vice president at John S. Herold Inc., a Greenwich, Conn., oil and gas research firm.

However, there was no immediate comment from Texaco’s largest shareholder, TWA Chairman Carl C. Icahn, who has repeatedly criticized the company’s restructuring agenda as inadequate. He has been threatening a takeover attempt.

Canadian analysts also anticipated opposition from Canadians concerned about monopolies and U.S.-controlled industry there. The transaction must be approved by Canadian regulatory agencies.

“Canada’s biggest oil company has just got bigger,” Calgary oil analyst Wilf Gobert of Peters & Co. told the Canadian press.

Excluded from the sale are certain oil exploration properties of Texaco Canada located in the West African nation of Guinea Bissau, George’s Bank off Nova Scotia and heavy oil and tar sands projects in Western Canada.

Imperial must guarantee the jobs of all 3,200 Texaco Canada employees, and for two years must continue to offer the same employee benefit plans, the company’s statement said.